What happens if you die and you have a leased vehicle? Can one of your estate beneficiaries keep paying the lease and use the car? Can the estate or a beneficiary purchase the car? Does the lease terminate and the car dealership take possession of the vehicle? This blog post, the third in a series about what happens to your beloved car upon your death (See Part 1 and Part 2), tackles these questions.

A car lease is a contract. Ultimately, whatever happens to your leased vehicle when you die is subject to the terms of that contract. And those terms can vary depending upon whatever the particular dealership and lessee agreed to in the lease. In one vehicle lease I reviewed, the agreement states, “You will be in default if: . . . You die and there is no surviving lessee.” That language addresses the situation in which two spouses lease a vehicle and one spouse passes away. If that occurs, under this particular lease, no default exists, and the other spouse becomes solely responsible for adhering to the lease for its remaining term. If both spouses die, then the lease will then be in default.

What happens if the lease is in default? According to the vehicle lease I reviewed, “If the Lease is in default, we may at our election, take any one or more of the following actions . . . .“ The “we”  in the vehicle lease is, of course, the dealership. The actions the dealership may take include purchasing insurance and charging the estate for these costs, canceling any products and services the lessee purchased in addition to the lease, and repossessing the vehicle.

The key phrase is “we may at our election.” Dealerships generally present leases that give them a great deal of discretion about how they might proceed if the lessee dies. It is possible that the dealership could choose to terminate the lease when the lessee dies and enter into a new lease with an estate beneficiary for the same vehicle. Vehicle leases often offer an option to purchase the vehicle upon early termination. It is possible that the personal representative of the estate or one of the estate beneficiaries could purchase the vehicle under the terms presented by the vehicle lease, but only if the dealership consents. If the estate is the purchaser, the car could then be distributed to a particular beneficiary as part of their share of the estate. Depending on the language of the decedent’s will or revocable living trust, a Nonjudicial Dispute Resolution Agreement under Washington’s Trust and Estate Dispute Resolution Act (TEDRA) may be desirable to effectuate this transaction. It is also entirely possible that the dealership will choose to repossess the vehicle, charging the estate for any remaining fees owed pursuant to the lease agreement.

So next time you lease a car, you may want to look over the lease with an eye not only for the car itself along with the monthly payment amount and lease term, but also for what might happen if you pass away before the lease term expires.

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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